State Investigation of Epic Expands to Chief Financial Officer, Board

A sign is seen outside of 50 Penn Place in Oklahoma City, where Epic Charter Schools leases 40,000 square feet for administrative use.

A state investigation into Epic Charter Schools has expanded
to include the school’s chief financial officer and four current or former
board members, according to a search warrant filed in Oklahoma County Wednesday.

In the affidavit for the search warrant, an Oklahoma State Bureau of Investigation agent alleges Epic has been using state-appropriated funds to pay for students’ extracurricular expenses through independent vendors but reported those expenditures to the state as “instructional services,” which the OSBI agent alleges is fraud.

Named in the affidavit are Josh Brock, the school’s CFO, who
made the purchases, as well as Doug Scott, Travis Burkett, Mike Cantrell and
Peter Regan, who are being investigated for allegedly neglecting their duty as
board members to oversee the school’s operations.

The OSBI on Wednesday seized a laptop and bank statements from OKC Storm Athletics, a Christian sports vendor for home-school students, according to its website. Epic pays vendors for student activities through what Epic calls its “Learning Fund.”

The affidavit is the latest in an ongoing investigation into financial wrongdoing at the state’s largest virtual charter school.

Epic has denied any wrongdoing, and on Wednesday afternoon issued a statement saying, “Epic and its founders will continue to cooperate with investigators, who have now been probing the school for more than six years. It is important to note that no charges have ever been filed.We are confident that the end result of this investigation will be as it has always been – no finding of wrongdoing.”

Epic is the only virtual school in
Oklahoma that uses a “learning fund’ – essentially a portion of each student’s
state funding ($800 to $1,000) that is set aside to be used on curriculum, a
laptop rental, art supplies, workbooks, and other items of the family’s
choosing. Families also use the funds on a variety of extracurricular
activities, like club sports, martial arts, dancing or summer camps.

Parents don’t actually receive the
money directly but instead request a purchase from Epic, which then pays the
vendors directly. The school now has more than 1,200 vendors.

The learning fund is a big
recruitment tool to attract families, and families who refer new students are
rewarded with an additional deposit into their student’s fund.

According to the affidavit, Epic in
2012 was advised by an attorney for its sponsoring school district at the time,
Graham-Dustin Public Schools, that using the learning fund for extracurricular
activities when the students received no elective credit would violate state
law.

David Chaney, a businessman who
co-founded the school, then opened a checking account for the learning fund and
transferred state funds to it, which Brock used to pay for students’
extracurricular activities, the affidavit states. Those purchases did not
appear on Epic’s general fund payment register and were reported to the state
as “instructional services.”

Rebecca Wilkinson, executive
director of the Statewide Virtual Charter School Board, told the OSBI agent
instructional expenditures “must be a course supported by a teacher of record,
a recorded grade and included on the transcript,” the affidavit states. In many
cases, these weren’t. The agent cites a statute he says is evidence the school
committed fraud.

The agent in the affidavit accuses
Chaney and Brock of concealing fraudulent expenditures “by disguising the
payments as instructional services” and falsifying corporate records.

The OSBI agent reported at least two
instances when Epic used vendors who were convicted felons.

The OSBI is also investigating
whether Burkett, Cantrell, Regan and Scott neglected their duties as board
members in violation of the law. Cantrell, head of an oil and gas company in
Ada, is a current board member and Scott, a Tulsa attorney, is chairman.
Burkett and Regan are no longer on the board.

This search warrant is the second in as many months filed by the
OSBI. In July, the agents seized an Epic teacher’s computer and cell
phone in search of evidence related to alleged embezzlement of state funds and
obtaining money under false pretenses, including through the use of “ghost
students” who didn’t actually receive instruction through the school.

The school’s co-founders, Chaney and Ben Harris, split
profits of $10 million between 2013 and 2018, that affidavit states.

The OSBI’s investigation into Epic has been ongoing since
2013. When it’s complete, the agency is expected to present its findings to the
Oklahoma County district attorney for possible filing of criminal charges.

In addition, the school is undergoing an investigative audit
by the State Auditor & Inspector, and at least two federal probes – by the
Federal Bureau of Investigation and the U.S. Department of Education.

The school is also facing a potential lawsuit by several
former teachers, who say they were pressured into withdrawing and re-enrolling
students to manipulate enrollment to improve the school’s report card
grade.

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